Reforms unveiled by the government yesterday to ‘fundamentally rewire’ the homeownership system will have huge ramifications for the property market, a leasehold specialist has said - as practitioners and MPs begin to examine the proposed legislation.

The prime minister yesterday announced that ground rents would be capped at £250 a year as part of measures to shake-up the ‘outdated’ leasehold system – although the cap is not expected to come into force until 2028.

The draft Commonhold and Leasehold Reform Bill, published yesterday, also bans new leasehold flats, ends forfeiture, whereby leaseholders can lose their home and the equity they have built up by defaulting on a debt, and introduces an easier process for leaseholders to switch to commonhold.

Shabnam Ali-Khan, a partner at Russell-Cooke who specialises in leasehold enfranchisement, told her LinkedIn followers that the bill has huge ramifications across the market.

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‘Will commonhold units cost more than leasehold flats? Probably yes. How will developers feel about being forced to provide commonhold? Will lenders be happier and more confident? With the capping of ground rent potentially lowering freehold values how will this affect pensions? With ground rent funds? Lots of questions.’

Giving his initial thoughts, conveyancing trainer and former practising solicitor Stephen Desmond said the ground rent cap will be a major relief to conveyancers ‘as it reduces transaction friction, removes uncertainty for lenders, and provides a clear benchmark’.

The government has published a separate consultation on commonhold, which closes on 24 April. Law Society president Mark Evans said Chancery Lane will seek member input for its response.

The bill was laid in parliament yesterday for pre-legislative scrutiny by the housing, communities and local government select committee.